Ajoy Kumar Banerjee & Ors. Etc Vs Union of India & Ors. Etc On 21 March, 1984

Ajoy Kumar Banerjee & Ors. Etc vs Union Of India & Ors.
Etc on 21 March, 1984
Supreme Court of India

Ajoy Kumar Banerjee & Ors. Etc vs Union Of India & Ors. Etc on 21 March, 1984
Equivalent citations: 1984 AIR 1130, 1984 SCR (3) 252
Author: S Mukharji
Bench: Mukharji, Sabyasachi (J)
PETITIONER:
AJOY KUMAR BANERJEE & ORS. ETC.
Vs.
RESPONDENT:
UNION OF INDIA & ORS. ETC.
DATE OF JUDGMENT21/03/1984
BENCH:
MUKHARJI, SABYASACHI (J)
BENCH:
MUKHARJI, SABYASACHI (J)
CHANDRACHUD, Y.V. ((CJ)
PATHAK, R.S.
CITATION:
1984 AIR 1130 1984 SCR (3) 252
1984 SCC (3) 127 1984 SCALE (1)539
CITATOR INFO :
RF 1990 SC 104 (8)
RF 1992 SC 81 (37)
ACT:
Constitution of India 1950 Articles 14 19(1) (g)
Article 31B & Insurance Business (Nationalisation) Act 1972
Sec. 16, Right of Central Government frame schemes under the
Act-Whether affects fundamental rights of employees
companies constituted under the Act.
Inclusion of an Act in the Ninth Schedule does not
protect order or notifications issued under the said Act.
Scheme notified under Sec. 16(1) whether protected.
Introduction of reform through legislation-Law need not
have universal application-Piecemeal method of introducing
reforms-Whether permissible-Statutory provision whether
could be struck down on vice of underinclusion.
Industrial Disputes Act 1947-Whether applicable to
general insurance companies.
General Insurance Business (Nationalisation) Act 197
Sec. 16(1)(g).
General Insurance (Nationalisation and Revision of Pa!.
Scales And other Conditions of Service of Supervisory
Clerical and Subordinate Staff) Second Amendment Scheme of
1980-Scheme of 1980 relating for revision of pay scales and
other terms and conditions of service-Whether ultra vires
Indian Kanoon - http://indiankanoon.org/doc/1995929/ 1

Sec. 16(2) and invalid- Whether suffers from vice of

excessive delegation of legislative power.
Administrative Law-Delegated legislation-Principles of-
Scope of subordinate legislation .
Interpretation of Statutes-Conflict between the
statutes-one special other general-Which to prevail-Tests
for determination of.
Interpretation of statutes-Not mere exercise in
semantics-Provisions conferring or delegation power-
Construction.
253
HEADNOTE:
Prior to 1972, there were over 100 Insurance Companies-
Indian and A, foreign. The conditions of service of the
employees of these companies were governed by the respective
contracts of service between the companies and the
employees. On 13th May 1971, the Government of India assumed
management of these general insurance companies under the
General Insurance (Emergency Provisions) Act, 1971. The
General Insurance Business (Nationalisation) Act , 1972
nationalised general insurance business.
Four merger schemes were framed in 1973 by the Central
Government in exercise of the powers contained in s. 16(1)
of the Act and four companies; oriental Fire and General
Insurance Company, National Insurance Company New India
Assurance Company and United India Insurance Company Ltd.,
were merged into and they alone were allowed to carry on the
business of general insurance. These companies started
functioning from Ist January, 1973 and the process of merger
was completed by Ist January, 1974' when the aforesaid four
schemes came into force.
The Government of India by a notification dated 27th
May, 1974, framed a 'scheme' called the General Insurance
(Rationalisation and Revision of Pay Scales and other
Conditions of Service of Supervisory, Clerical and
Subordinate Staff) Scheme, 1974 in exercise of the powers
conferred by s. 16(1)(g) of the Act. This scheme provided
for the rationalisation and revision of pay scales and other
terms and conditions of service of employees working in
supervisory, clerical and subordinate positions and governed
the pay scales, dearness allowance, other allowances and
other terms and conditions of the general insurance
employees. Paragraph 23 of the Scheme provided that the new
'scales of pay' shall remain in force till December 31, 1976
and thereafter shall continue to be in force unless modified
by the Central Government.
In 1976, the Board of Directors approved a policy for
promotion. On Ist June, 1976 another scheme by which
amendments were made with regard to Provident Fund, was
introduced. On 30th July 1977, a Scheme amending provisions

regarding sick leave was also introduced. ' F

The employees submitted a memorandum objecting to the
revision of pay scales and other conditions of service and
wanted a reference to the Industrial Tribunal. The class III
and IV employees however did not accept the revision of
Service Conditions, pay scales dearness allowance, etc. and
raised industrial dispute. There were conciliation
proceedings and there was failure to bring about amicable
settlement of disputes.
In 1980, the Government introduced the General
Insurance (Rationalisation and Revision of Pay Scales and
other conditions of Service of Supervisory, Clerical and
Subordinate Staff) Second Amendment Scheme, 1980. This
Scheme which was introduced by a notification dated
September 30, 1980 made detailed provisions as to how the
adjustment allowance is to be dealt With so far as Dearness
Allowance, overtime Allowance, Contribution to Provident
Fund and other retirement benefits were concerned. Paragraph
7 which dealt with 'retirement' stipulated that an employee
who was in service of the Corporation before the
254
commencement of the Scheme of 1980 should retire from
service when he attains the age of 60 years, but an
employee, who joins the service of the Corporation after the
commencement of the Scheme would retire on attaining the age
of 58 years. The Fourth Schedule to the Scheme indicated tho
revised scales of pay.
The petitioners in their writ petitions to this Court
contended that the terms and conditions of service
enunciated in 1974 being a result of bilateral agreement
could not be changed unilaterally to the detriment of the
employees and that the notification deprived the rights of
the employees to receive dearness allowance etc. with the
rise in the cost of living index. It was further contended
that the Scheme was violative of s. 16(2) of the Act and
ultra vires Articles 14,19(1)(g) and Article 31(2) of the
Constitution, and that the Constitution 44th amendment
deleting Articles 31 and 19 cannot save the Scheme, since
the amendment came into force only 20th June, 1979, whereas
the impugned notification affecting the rights of the
employees to emoluments took effect from 1st January, 1979.
The respondents contested the writ petitions on the
ground that s. 16(6) authorised the Central Government by
notification, to add, to amend or to vary any scheme framed
under s. 16 and consequently rationalisation or revision of
pay scales was permissible by the 1980 scheme. Moreover in
comparison With other employees in governmental or public
sector, the employees of the general insurance, companies
were 'High-wage islanders' and it was consequently necessary
to put a ceiling on their emoluments and other amenities in
order to facilitate better functioning of the insurance
companies as well as to subserve the object and purpose of
the nationalisation policy.

Allowing the writ petitions,

^
HELD: 1. (a) The impugned scheme of 1980 is bad as
being beyond the scope of the authority of the Central
Government, under the General Insurance Business
(Nationalisation) Act, 1972, and therefore quashed. This,
however, will not prevent the Government, if it is so
advised, to frame any appropriate legislation or make any
appropriate amendment giving power to the Central Government
to frame any scheme as it considers fit and proper. [290G;
291A-B]
1. (b) The scheme of 1980 so far as it is not related
to the amalgamation or merger of insurance companies, is not
warranted by sub-s. (1) of section 16 . The scheme is
therefore bad and beyond authority. [278D]
A.V. Nachane & Another v. Union of India & Another
[1982] 2 S.C.R p. 246, Madan Mohan Pathak v. Union of India
JUDGMENT:
Corporation of India v. D.J. Bahadur & Ors. [1981] 1 S.C.R. p. 1083. referred to.
2. The duty of the Court in interpreting or construing a provision is to read the section, and
understand its meaning in the context interpretation of a provision or statute is not a mere exercise
in semantics but an attempt to find out the meaning of the legislation from the words used,
understand the context and the purpose of the expressions used and then to construct the
expressions sensibly. [275C-D] 3 (a) The scheme is an exercise or delegated authority. The scope
and ambit of such delegated authority must be so construed, if possible, as not to make it bad
because of the vice of excessive delegation of legislative power. In order to make the power valid,
s.16 of the Act should be so construed in such manner that it does not suffer from the vice of
delegation of excessive legislative authority. [275E]
3. (b) Unlimited right of delegation is not inherent in the legislative power. [275 F] Gwalior Rayon
Silk Mfg. (Wvg.) Co. Ltd. v. The Asst. Commissioner of Sales Tax & Ors., [1974] 2 S.C.R. p. 879,
referred to.
4. The growth of legislative power of the executive is a significant development of the 20th century.
The theory of laissez-faire has been given a go-by and large and comprehensive powers are being
assumed by the State with a view to improve social and economic well being of the people. Most of
the modern socioeconomic legislations passed by the legislature lay down the guiding principles of
the legislative policy. The legislatures, because of limitation imposed upon them and the time factor,
hardly can go into the matters in detail. The practice of empowering the executive to make
subordinate legislation within the prescribed sphere has evolved out or practical necessity and
pragmatic needs of the modern welfare State. [275G-276A]
5. Regarding delegated legislation, the principle which has been well-established is that the
legislature must lay down the guidelines, the principles of policy for the authority to whom power to
make subordinate legislation is entrusted. The legitimacy of delegated legislation depend upon its

being used as ancillary which the legislature considers to be necessary for the purpose of exercising i
s legislative power effectively and completely. The legislature must retain it its own hand the
essential legislative function which consists in declaring the legislative policy and lay down the
standard which is to be enacted into a rule of p law, and what can be delegated is the task of
subordinate legislation which by its very nature is ancillary to the statute which delegates the power
to make it effective provided the legislative policy is enunciated with sufficient clearness or a
standard laid down The courts cannot and do not interfere on the discretion and that undoubtedly
rests with the legislature itself in determining the extent of the delegated power in a particular case.
[276B-D]
6. The authority and scope for subordinate legislation can be read in either of the two ways; namely
one which creates wider delegation and one which restricts that delegation. [277E] In the instant
case, the Act must be read in conjunction with the Memorandum in Clause No. 16 of the Bill which
introduced the Act in question. But above all, it must be read in conjunction with sub-section 2 of
section 16 of the Act which clearly indicated the object of framing the scheme under s. 16(1) of the
Act. [277D]
7. In view of the language of sub-s. (2) of section 16 and the memorandum to the Bill, the one which
restricts the delegation must be preferred to the other. So read, the authority given under s. 16 under
the different clauses of sub-section (I) must be to subserve the object as envisaged in sub-section (2)
of section 16 of the Act, and if it is so read then framing of a scheme for purposes mentioned in
different clauses of sub-section (1) of section 16 must be related to the amalgamation or merger of
the insurance companies as envisaged both in the memorandum on delegated legislation as well as
sub-section (2) of section 16. [277F- G]
8. Sometimes there have been rise in emoluments with the rise in the cost of indeed in certain public
sector corporations. The legislature however is free to recognise the degree of harm or evil and to
make provisions for the same. In making dissimilar provisions for one group of public sector
undertakings does not per se make a law discriminatory as such. Courts will not sit as super-
legislature and strike down a particular classification on the ground that any under-inclusion
namely that some others have been left untouched so long as there is no violation of constitutional
restraints. [285D-E]
9. Piece-meal approach to a general problem permitted by under-inclusive classifications, is

sometimes justified when it is considered that legislatures deal with such problem, usually on an
experimental basis. It is impossible to tell how successful a particular approach might be, what
dislocation might occur, and situation might develop and what new evil mights be generated in the
attempt. Administrative expedients must be forged and tested. Legislators recognizing these factors
might wish to proceed cautiously, and courts must allow to do so. [286B-C] Special Courts Bill
[1978] 2 S.C.R. p. 476 at pages 540-541, State of Gujarat and Anr. v. Shri Ambica Mills Limited
Ahmedabad etc. [1974] 3 S.C.R. p. 760 and R.K. Garg etc. v. Union of India & Ors. etc., [1982] I
S.C.R. p. 947, referred to.

In the instant case, as there was no industrial dispute pending, the ground that the petitioners have
been chosen out of a vast body of workmen to be discriminated against and excluded from the
operation of the Industrial Disputes Act, is no ground that there has been no violation of Article 14
of the Constitution. [286D]
10. Differentiation is not always discriminatory. If there is a rational nexus on the basis of which
differentiation has been made with the object sought to be achieved by particular provision, then
such differentiation is not discriminatory and does not violate the principles of Article 14 of the
Constitution. There is intelligible basis for differentiation. Whether the same result or better result
could have been achieved and better basis of differentiation evolved is within the domain of
legislature and must be left to the wisdom of the legislature. [288H- 289B]
11. Article 14 does not prevent the Legislature from introducing a reform i.e. by applying the
legislation to some institutions or objects or areas only according to the exigency of the situation and
further classification of selection can be sustained on historical reasons or reasons of administrative
exigency or piece-meal method of introducing reforms. The law need not apply to all the A persons
in the sense of having a universal application to all persons. A law can be sustained if it clears
equally with the people of well-defined class- employees of Insurance Companies as such, and such
a law is not open to the charge of denial of equal protection on the ground that it had not application
to other persons. [290E- F] State of Karnataka & Anr. etc. v. Ranganatha Reddy, & Anr. etc. [1978] I
S.C.R. p. 641 at pages 672, 676 & 691, referred to.
In the instant case, for the purpose of rationalisation, the insurance companies wanted to curtail the
emoluments of class Ill and class IV employees on a small scale. It cannot therefore be said that
there are no distinguishing factors and that fol choosing a particular group for experiment, the
respondents should be found guilty of treating people differently while they are alike in all material
respects [288G]
12. The object of the General Insurance Business (Nationalisation) Act 1972 is to run the business
efficiently so that the funds available might be utilised for socially viable and core projects of
national importance. The Nationalised Banks and the Insurance Companies for the purposes of
applicability or otherwise of the provisions of the Industrial Disputes Act cannot be treated as
belonging to one class. Historical reasons provide an intelligible differential distinguishing
Nationalised Insurance Companies from the Nationalised Banks. The financial resources, structures
and functions of the Banks are different from those of the Insurance Companies. [288A-E]
13. The general rule to be followed in case of conflict between two statutes is that the later abrogates
the easier one. A prior social law would yield to a later General law if either of these two conditions
are satisfied:
(i) The two ale inconsistent with each other and (ii) there is some express reference in the later to
the earlier enactment. [282D-F]

14. (i) The Legislature has the undoubted right to alter a law already promulgated through
subsequent legislation, (ii) A special law may be altered, abrogated or repealed by a later general law
by an express provision,
(iii) A later general law will override a prior special law if the two are so repugnant to each other that
they cannot co-exist even though no express provision in that behalf is found in the general law, and
(iv) It is only in the absence of a provision to the contrary and of a clear inconsistency that a special
law will remain wholly unaffected by a later general law. [282G-H] Maxwell-"Interpretation of
Statutes Twelfth Edition pp. 196-198, referred to.
J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. State of U.P. & Ors. [1961] 3 S.C.R,. p. 185 and U.P.
State Electricity Board & Ors. v. Hari Shanker Jain and Ors. [1979] 1 S.C R. p. 355, referred to.
15. The General Insurance Business (Nationalisation) Ac; was put in the Ninth Schedule of the
Constitution as Item 95 on loth August 1975. If any of the rights of the petitioners had been affected
by the scheme of 1980 then these rights would not enjoy immunity from being scrutinised simply
because the Act under which the scheme was framed had been put in the Ninth Schedule. In any
event any right which accrued to the persons concerned prior to the placement of the Act in the
Ninth Schedule cannot be retrospectively. affected by the impugned provisions. [284E-G] Prag Ice &
Oil Mills & Anr. etc. v. Union of India, [1978] 3 S.C.R. p. 293, referred to In the instant case,
empowering the Government to frame schemes for carrying out the purposes of the Act does not in
any way affect or abridge the fundamental rights of the petitioners and would not attract Article
19(1)(g). [284H; 285A] & ORIGINAL JURISDICTION: Writ Petition Nos. 5370-74 of (Under Art. 32
of the Constitution) M. K. Ramamurthi, J. Ramamurthi and Miss R. Vaigai for the petitioners in
WPs. 5370-74 R. K. Garg and V. J. Francis J. P. Cama & Mukul Mudgal for Intervener in WPs. 5370-
74. K. Parasaran, Attorney General, M. K. Banerjee, Additional Solicitor General, Miss A. Subhashini
and C. V. Subba Rao, for the respondent (Union of India) P. R. Mridul, O. C. Mathur, S. Sukumaran,
D. N. Mishra & Miss Meera Mathur for respondent no. 2 in WPs. 5370-74 & 5434.
Hemant Sharma & Indu Sharma for the respondent in WPs. 5370-74. r. Vineet Kumar, Lalit Bhasin,
Vinay Bhasin & Miss Arshi singh?, for Respondent Nos. 3 to 6 in WPs. 5434 & 5370-74.
Ambrish Kumar for Intervener in WP. 5370.
Chandidus Sinha Intervener-in-person in WPs. 5370-74. The Judgment of the Court was delivered
by SABYASACHI MUKHARJI J. These petitions under Article 32 of the Constitution are filed by the
employees of the General Insurance Companies and the All India Insurance Employees Association.
The respondents are, Union of India, the General Insurance Corporation of India and four General
Insurance companies.
The petitioners challenge the Notification dated 30th September, 1980 of the Ministry of Finance
(Department of Economic Affairs) (Insurance) introducing what is called General Insurance
(Rationalization and Revision of Pay Scales and other Conditions of Service of Supervisory, Clerical

and Subordinate Staff) Second Amendment Scheme, 1980 as being illegal and violative of their
fundamental rights under Articles 14, 19(1)(g) and 31 of the Constitution of India.
Prior to 1972, there were 106 General Insurance companies Indian and foreign. Conditions of
service of these employees were D, governed by the respective contracts of service between the
companies and the employees. On 13th May, 1971, the Government of India assumed management
of the general insurance companies under the General Insurance (Emergency Provisions) Act, 1972.
The general insurance business was nationalised by the General Insurance Business
(Nationalisation) Act, 1972 (Act 57 of 1972). The preamble of the Act explains the purpose of the Act
as to provide for the acquisition and transfer of shares of Indian insurance companies and
undertakings of other insurers in order to serve better the needs of economy in securing
development of . general insurance business in the best interest of the community and to ensure that
the operation of the economic system does not result in the concentration of wealth to the common
detriment, for the regulation and control of such business and for matters connected therewith or
incidental thereto.
Act 57 of 1972, by Section 2, declared that it was for giving effect to the policy of the State towards
securing the principles specified in clause (c) of Article 39 of the Constitution. Under Section 3(a) of
the Act, 'acquiring company' has been defined as any Indian insurance company and, where a
scheme had been framed involving the merger of one or more insurance companies in another or
amalgamation of two or more such companies, means the Indian insurance company in which any
other company has been merged or the company which has been framed as a result of . the
amalgamation.
Section 4 provides that on the appointed day all the shares in the capital of every Indian insurance
company shall be transferred to and vested in the Central Government free of all trusts, liabilities
and encumbrances-affecting these.
Section S provides for transfer of the undertakings of other existing insurers. Section 6 provides for
the effect of transfer of undertakings. Section 8 provides for the Provident Fund, superannuation,
welfare or any other fund existing. Section 9 stipulates that Central Government shall form a
Government company in accordance with the provisions of the Companies Act, to be known as the
General Insurance Corporation of India for the purpose of superintending, controlling and carrying
on the business of general insurance. Section 10 stipulates that all shares in the capital of every
Indian insurance company which shall stand transferred to and vested in the Central Government
by virtue of Section 4 shall immediately after such vesting, stand transferred to and vested in to
Corporation .
Chapter IV deals with the amounts to be paid for acquisition and as such we are not concerned in
this case with that chapter in view of the controversy involved.
Chapter V of the aforesaid Act deals with "Scheme for reorganisation of general insurance business"
Section 16 and 17 of the Act in this chapter are as follows:

"16. (1) If the Central Government is of opinion that for the more efficient carrying on
of general insurance business it is necessary so to do, it may, by notification, frame
one or more schemes providing for all or any of the following matters:
(a) the merger in one Indian insurance company of any other Indian insurance
company, or the formation of a new company by the amalgamation of two or more .
Indian insurance companies;
(b) the transfer to and vesting in the acquiring company of the undertaking
(including all its business, properties, assets and liabilities) of any Indian insurance
company which ceases to exist by reason of the scheme;
(c) the constitution, name and registered office and the capital structure of the
acquiring company and the issue and allotment of shares;
(d) the constitution of a board of management by what ever name called for the
management of the acquiring company;
(e) the alteration of the memorandum and articles of association of the acquiring
company for such purposes as may be necessary to give effect to the scheme,
(f) the continuance in the acquiring company of the services of all officers and other
employees of the Indian insurance company which has ceased to exist by reason of
the scheme, on the same terms and conditions which they were getting or, as the case
may be, by which they were governed immediately before the commencement of the
scheme;
(g) the rationalisation or revision of pay scales and other terms and conditions of
service of officers and other employees wherever necessary;
(h) the transfer to the acquiring company of the provident, superannuation, welfare
and other funds relating to the officers and other employees of the Indian insurance
company which has ceased to exist by reason of the scheme;
(i) the continuance by or against the acquiring company of legal proceedings pending
by or against any Indian insurance company which has ceased to exist by reason of
the scheme, and the initiation of such legal proceedings, civil or criminal, as the
Indian insurance company might have initiated if it had not ceased to exist;
(j) such incidental, consequential and supplemental matters as are necessary to give
full effect to the scheme.
(2) In framing schemes under sub-section (1), the object of the Central Government
shall be to ensure that ultimately there are only four companies (excluding the

Corporation) in existence and that they are so situate as to render their combined
services effective in all parts of India.
(3) Where a scheme under sub-section (1) provides for the transfer of any property or
liabilities, than, by virtue of the scheme, the property shall stand transferred to and
vested in, and those liabilities shall be transferred to and be come the liabilities of the
acquiring company.
(4) If the rationalization or revision of any pay scales or other terms and conditions of
service under any scheme is not acceptable to any officer or other employee, the
acquiring company may terminate his employment by giving him compensation
equivalent to three months remuneration, unless the contract of service with such
employee provides for a shorter notice of termination.
Explanation.-The compensation payable to an officer or other employee under this

sub-section shall be in addition to, and shall not affect, any pension, gratuity,
provident fund of other benefit to which the employee may be entitled under his
contract of service. (5) Notwithstanding anything contained in the Industrial
Disputes Act, 1947 or in any other law for the time being in force, the transfer of the
services of any officer or other employee of an Indian insurance company to the
acquiring company shall not entitle any such officer or other employee to any
compensation under that Act or other law, and no such claim, shall be entertained. by
any court, tribunal or other authority.
(6) The Central Government may, by notification add to, amend or vary any scheme
framed under this section.
(7) The provisions of this section and of any scheme. framed under it shall have effect
notwithstanding anything to the contrary contained in any other law or any
agreement, award or other instrument for the time being in force.
17. A copy of every scheme and every amendment , thereto framed under section 16
shall be laid, as soon as may be after it is made, before each house of Parliament."
The object of any scheme under this chapter, according to the petitioners, was clear from the main
part of Section 16(1) of the said Act, i.e. a scheme made under this chapter was only for the purpose
of providing for the merger of Indian insurance companies, and this was made clear by Section 16(2)
of the Act. Section 16(4) of the said Act, it was contend on behalf of the petitioners, implied that any
scheme of rationalization or revision of pay scales and other terms could only be in the context of
merger and amalgamation of a one or more of the companies. In this connection mention was made
in the petition of the "Memorandum regarding delegated legislation" submitted to the Parliament
along with the General Insurance Business (Nationalisation) Bill, 1972 (Bill No. 60 of 1972), which
later became the aforesaid Act. It was made explicit, according to the petitioners, that clause 16 of
the Bill, later Section 16 of the Act "empowers the Central Government to frame one or more

schemes for the . merger of one Indian insurance company with another or for the amalgamation of
the two or more Indian insurance companies and for matter consequential to such merger or
amalgamation, as the case might be." It was in the aforesaid context of merger of companies that
Section 16(1)(g) provided for rationalisation and revision of pay scales and other terms and
conditions of service of officers and other employees wherever necessary.
In exercise of the powers contained in the aforesaid Section ] 6(1) of the said Act, four merger
schemes were framed in 1973 by the Central Government and the four companies, oriental Fire and
General Insurance Company Ltd., National Insurance Company Ltd., New India Assurance
Company Ltd., and United India Insurance Company Ltd., into one or the other of which several
general insurance companies in the country were merged, were alone allowed to carry on the
business of general insurance. The preamble of the scheme, called the New India Assurance
Company Limited (Merger) Scheme, 1973, had stated that the Central Government was of the
opinion that for the more efficient carrying on of the general insurance business, it was necessary to
frame scheme for the merger of certain Indian Insurance companies in the New India Assurance
Company Limited. The preambles of the merger schemes in respect of the other three companies
were on similar lines. These four companies are subsidiaries of the General Insurance Corporation
of India. The companies started functioning from 1st January, 1973 and the process of merger of the
various companies into one of the other four companies was completed by I st January, 1974, when
the said four schemes came into force. The said schemes provided for the transfer of officers and
employees of the merged companies to the transferee Company. The memorandum and the articles
of association of the four Companies were also suitably altered by the said schemes. Thereafter there
had been no merger or amalgamation of any insurance company. The petitioners stated that there
had been no reorganisation of general insurance business either. This position is not in dispute.
By a notification dated 27th May, 1974, the Ministry of Finance (Department of Revenue and
Insurance Government of India, framed a 'scheme' called the General Insurance (Nationalisation
and Revision of Pay Scales and other Conditions of Service of Supervisory, Clerical and Subordinate
Staff) Scheme, }974, and the preamble of the scheme stated that "whereas the Central Government
is of the opinion that for the more efficient carrying on general insurance business, it is necessary to
do", therefore, in exercise of the powers conferred by Section 16(1)(g) of the aforesaid Act, the
Central Government framed the 'scheme' to provide for the rationalisation and revision of pay scales
and other terms and condition of service of employees working in supervisory, clerical and
subordinate position under the insurers. The said scheme governed the pay scales, dearness
allowance, other allowances and other terms. and conditions of the general insurance employees.
It dealt, inter alia, with nature and hours of work, fixation, retirement, provident fund and gratuity.
Paragraph 23 of the 1974. scheme provided that the 'New scales of pay' shall remain in force initially
upto and inclusive of 31st December, 1976 and thereafter. shall continue to be in force unless
modified by the Central Government. The scheme was framed after negotiations with the parties
concerned. The petitioners further state that the scheme was purported to have been made under
Section 1611)(g) of the said Act and it was treated as one made under Section 16(1) as part of the four
merger schemes. The petitioners state that otherwise, it would have been invalid.

The petitioners further state that the employees of the insu-
rance companies serving throughout the country were, however, subsequently not satisfied with the
pay scales, dearness allowance, other terms and conditions available to them on account of several.
factors. Through their associations, they submitted their charters of demands to the General
Insurance Corporation of India in 1977 for the revision of terms and conditions of their service.
Negotiations were held between the management and the unions for the upward revision but
according to the petitioners, nothing happened. Industrial dispute was raised between the
management of General Insurance Corporation of India and the class III and IV employees. On the
demand of revision of pay scales, dearness allowance and other allowances and service conditions.
The Chief Labour Commissioner (Central), Government of India, Ministry of Labour, issued
conciliation notice dated 11th September, 1980 under the Industrial Disputes Act, 1947 to the
Chairman of the General Insurance Corporation and the general secretaries of the employees'
associations. There were several meetings. It was decided, according to the petitioners, that in the
meanwhile until the talks were resumed the employees would not resort to strike. There was
representation to the respondents not to change the conditions of service pending the conciliation
proceedings. It is not necessary to refer in detail to all these, which have been set out in the petition.
But nothing fruitful happened. The Labour Commissioner in the circumstances sent a failure report
under the Industrial Disputes Act, 1947 to the Secretary, Government of India, Ministry of Labour,
stating that there was failure to bring about amicable settlement of disputes. The petitioners
contend that no further action was taken and according to them the conciliation proceedings were
still pending. This, however, is not accepted by the respondents, according to whom there was
failure report and the conciliation proceedings ended thereafter. The scheme mentioned
hereinbefore, which is under challenge was issued thereafter. We will have to deal with the scheme
in great detail as the same is the subject matter of challenge is these petitions under Article 32 of the
Constitution.
After the 1974 scheme, in 1976, the Board of Directors approved of promotion policy. On 1st June,
1976 another scheme by which there were amendments with regard to Provident Fund, was
introduced. As mentioned before in 1977, major unions submitted charters of demands to the
respondent No. 2, seeking revision in the terms and conditions of service of the employees with
retrospective effect. Between 10th March, 1977 to 30th March, 1977, memorandum was addressed
by the employees of all India Association to the Union Finance Minister.
In the memorandum addressed, it was stated that in the normal circumstances on the expiry of the
prescribed period of operation of an agreement, settlement of award, the unions usually submitted
charters of demands and the said charters of demands were settled either through mutual
negotiations or as a result of award of an industrial tribunal, built as the pay scales and other
conditions of service of the employees in general insurance industry were, however, governed by a
scheme or scheme to be formulated by the Central Government and it was the Central Government
which could amend these, the unions submitted that there was justification for making upward
revision the scheme and shifting the base years from 1960 to 1970-71 for the purpose of prescribing
pay scales. This point was stressed by counsel appearing for the General Insurance Company, in
order to emphasis that the unions always accepted the position prior to the present petitioner that

the government had the power to amend or make further schemes under the provisions of the
Nationalisation Act. On 30 July, 1977 scheme amending the provisions regarding sick leave was
introduced. In . 1978 Promotion Policy was revised by General Insurance Company. Between
1979-80 there were discussions between the management of the Corporation and the
representatives of the Trade Unions which were held on 8th, 9th, 10th October, 1979, 7th, 8th, 9th,
April, 1980, 12th and 13th June and 1st August 1980. The management of the Corporation after
several rounds of discussions with the Unions sought to narrow down the area of differences and
submitted to the Government the demands made by the Unions and the managements
recommendations. The General Insurance Corporation submitted before us that the Central
Government after finally considering the demands and recommendations of the management of the
Corporation framed and notified the scheme under challenge on 30th September, 1980.
It was contended on behalf of the petitioners that the said notification had been issued by the
Government suddenly and unilaterally, without any notice to the parties concerned. The employees
were taken unawares. It was contended that from the provisions of the said notification the service
conditions of the employees including the petitioners employees, particularly with regard to
dearness allowance, stagnation increments, retirement age and other increments had become worse
than before and detrimental to the employees. While the employees were eagerly awaiting
improvement in their service conditions, this notification had unilaterally altered the service
conditions to their prejudice petitioners in their petitions had alleged certain facts by certain
illustrations, which according to them, indicated that employees had been affected adversely, inter
alia, in gross starting salary of different group of employees, salary on confirmation of assistants
who are graduates etc. It was further stated that retirement age was 60 years for all the employees
under the 1974 scheme. But under the new scheme, retirement age was reduced to 58 years for
employees joining on or after I st January, 1979. Clause 7 of the impugned notification prescribed
different ages of retirement, though the employees were of the same class and similarly situated
according to the petitioners. Para 12(1) of the impugned scheme - provided that an employee who
was in service before the commencement of the said scheme would retire at the age of 60 years but
provided that an employee joining the service on or after the commencement of the said scheme
would retire from service on attaining the age of 58 years. This was discriminatory, according to the
petitioners, being violative of Article 14 of the Constitution.
lt was further alleged that stagnation increments that is increments after reaching the maximum of
the grade to all cadres up to maximum of 3 for every two years of service were given before, but now
under the present notification clause S substituted paragraph 7 and provided for no stagnation
increment except only one increment for two years to the employees in record clerk cadre.
Previously, there was no maximum limit on salary. Now maximum limit was fixed at Rs. 2750.
Earlier, according to the petitioners, House Rent Allowance was given to all employees irrespective
of Having official accommodation, under the new scheme, house rent ; allowance was withdrawn for
employees having official accommodation. Earned leave earlier could have been accumulated upto
180 days, but the new scheme limited the accumulation of earned leave upto 180 days tor the
employees retiring at the age of 58 years and 120 days for the employees retiring at the age of 60
years. It was stated in the petitions that this had substantially reduced the emoluments of the
general insurance employees, and it had adversely affected the employees throughout the country.

The main ground of the challenge is that the impugned notification is illegal as the Central
Government has no power to issue it under Section 16 of the said Act and such as the notification
framing the present "scheme" is ultra vires Section 16(1) of the General Insurance Business
(Nationalisation) Act 1972. According to the petitioners, once the merger of the insurance
companies took place and the process of reorganisation was complete on 1st January, 1974 as
mentioned before by forming the four insurance companies by the four schemes already framed in
1973, there could be no further schemes except in connection with further reorganisation of general
insurance business and the merger of more. insurance companies as mentioned in sub- section (1) of
Section 16 of the said Act. By the present alleged scheme there was no merger or reorganisation
contemplated, unlike 1974 scheme, according to the petitioners. The petitioners contend that merely
making amendment to the terms and conditions of service of the employees unconnected with or
not necessitated by the reorganisation of the. business or merger or amalgamation of the companies
would not fall within Section 16(1)(g) of the Act. According to the petitioners, the only properly
called schemes sanctioned under Section 16(1) are those four merger schemes of 1973 as would be
evident from the preamble to the Act.
The petitioners further contend that under the life Insurance Corporation Act, Banking Companies
Act. etc. there were power to frame regulations independently of reorganisation. But there is no such
power, according to the petitioners, under the General Insurance Business (Nationalisation) Act,
1972. The said notification therefore is without the authority of law. It is, further, submitted. that the
present service conditions of the employees unrelated to reorganisation of general insurance
business merger or amalgamation of insurance companies, could not form part of any scheme or
notification under section 16 of the aforesaid Act. Section 16(7) of the Act would not come into play
and the provisions or the Industrial disputes Act, 1947 including section 94 were applicable to the
general insurance industry. Therefore if the companies wanted to change the service condition of
their employees affecting them adversely, they should have given, the petitioners contend, notice of
changes under section 9A of the Industrial Disputes Act, 1947, negotiated with the employees and
arrived at some settlement or had the dispute adjudicated upon under the said Act. Since. this has
not been done, particularly when the conciliation proceed-
ings were still pending in the absence of Government's acknowledgement of failure report of the
conciliation officer, the action of the Government in issuing the unilateral notification is bad in law.
It is submitted further that impugned notification is ultra vires being violative of Article 14 of the
Constitution because it discriminated between employees similarly situated, particularly in the
matter of dearness allowance and retirement age.
The petitioners contend that under the Sick Textile Undertakings (Nationalisation) Act, 1974, the
Coking Coal Mines (Nationalisation) Act, 1972 etc., separate companies had been formed on
nationalisation. The employees of those companies were entitled to have their service conditions
regulated under Industrial Disputes Act, 1947. In the present case, the employees have been
deprived of the existing benefits without following the procedures prescribed under the Industrial
Disputes Act, 1947. Therefore. there was discrimination and violation of article 14 of the
Constitution. The petitioners therefore contend that the terms and conditions of service enunciated
in 1974 being as a result of bilateral agreement, could not be changed unilaterally, to the detriment

of the employees' fundamental rights to carry on their employment for gain and as such violative of
article 19(1) (g) of the Constitution. It is stated that the notification was illegal, being ultra vires
section 16 of the Act. Since, according to the petitioners, such notification deprived the rights of the
employees to receive dearness allowance etc. with the rise in the cost of living index without any
limit, it is deprivation of property without providing for compensation and is thus also violative of
article 31(2) of the Constitution. The petitioners, further, contend that the Constitution 44th
amendment deleting 1 Articles 31 and 19(1)
(f) cannot save the scheme since that Amendment came into force only on 20th June, 1979, whereas
the impugned notification affecting the rights of the employees to emoluments takes effect from 1st
January, 1979. It was further urged that the protection of article 31 read with Ninth Schedule of the
Constitution was not available to any scheme or notification much less the present one, The present
notification, according to the petitioners, disregarded the directive principles enunciated in Article
43 of the Constitution. The petitioners therefore ask for quashing the said notification by these
petitions under Article 32 of the Constitution.
The second batch of Writ applications (Writ Petition Nos. 5434-37 of 1980) are on behalf of the
employees as well as the General Insurance Employees All India Association challenge the - scheme
of 1980 more or less on the same though not identical grounds mentioned in Writ Petition Nos.
5370-74 of 1980. Interim order was passed in the said application regarding payment of dearness
allowance as would appear from the Court's order dated 25.8.1981. In the said order, directions were
given for payment of dearness allowance payable under the old scheme from the beginning of 1981
with quarter April, as well as quarter beginning from July, 1981 within certain time mentioned in
the said order. lt was further, directed that subsequent dearness allowances will be paid in
accordance with the directions to be given at the time of disposal of these writ applications.
In the Writ Petitions Nos. 5370-74 of 1980, there is a petition on behalf of All India National
General Insurance Employees Association for intervention. It represents a Trade Union of workmen
working in the offices of General Insurance Corporation of India, Bombay as well as its subsidiaries.
They, inter alia, allege that the main petitions have challenged the scheme of 1980 on purely
technical grounds and though it would be correct to say that the scheme of 1980 does not meet the
aspirations of the workers wholly as reflected in the various charters of demands submitted to the
management, they are of the opinion that the same is not completely bereft of any merit so that the
same may be quashed by this Court. They mentioned certain additional benefits available in the said
scheme of 1980 in paragraphs 15, 16, 17, 18 and 19 of the said application. . They therefore claim
right to intervene in the said Writ application Nos. 5370-74 of 1980. There is also an application by
Senior Assistants of the New India Assurance Company Ltd. and National Confederation of General
Insurance Employees, represented by its Vice-president under order XLVII Rule 6 of the Supreme
Court Rules of 1966 praying, for permission to intervene in these petitions. Upon this an interim
order was passed on 24.10.1580 staying the operation of the scheme (operation of the Notification
dated 30th September, 1980) and notice was issued in the stay application.
All these will be disposed of by this judgment. It will, therefore, be necessary, before we examine the
contentions raised in these petitions, to briefly consider the scheme of 1980. As mentioned before,

this scheme is called the General Insurance (Rationalisation and Revision of Pay Scales and other
Conditions of Service of Supervisory, Clerical and Subordinate Staff) Second Amendment Scheme,
1980. Some new definitions have been provided by paragraph 2 of 1980 scheme which included the
meaning of the 'Company' and under the scheme it mentioned that the 'Company' would mean the
four nationalised companies, National Insurance Company Limited, the New India Assurance
Company Limited, the oriental Fire and General Insurance Company Limited and the United India
Insurance Company Limited. Sub paragraph (ii) of paragraph 2 of the said scheme defines 'Net
monthly emoluments'. By sub- paragraph (ii), the amended definition of 'Revised terms', (Revised
Scales of Pay) was inserted. By paragraph 3, adjustment of pay was stipulated on the coming into
effect of operation of 1980 scheme. How the basic pay is to be fixed is provided by 1980 scheme. lt
also makes detailed provisions as to how the adjustment allowance is to be dealt with so far as
Dearness Allowance, overtime allowance, Contribution to Provident Fund and other retirement
benefits are concerned. Paragraph 5 deals with the 'Increments. Paragraph 6 deals with Earned
Leave and other Encasement of leave at the time of retirement and death. Paragraph 7 deals with
'Retirement' and' stipulates that an employee who was in service of the Corporation before the
commencement of the scheme of 1980 should retire from service when he attains the age of 60
years. But an employee, who joins the service of the Corporation after the commencements of the
scheme will retire on his attaining the age of 58 years. It further stipulates that an employee would
retire on the afternoon of the last day of the month in which he attains the age of 60 years or 58
years as the case might be. Clause 8 deals with 'Gratuity'. Clause 10 provides the duration of revised
terms and stipulates that the revised terms should be continued to be in force unless modified by the
Central Government. Then the Second Schedule of 1974 scheme which dealt with Travelling
Allowance category, Travel by Road and different allowances for the same, transfer grant were
amended and the new Fourth Schedule included scales of pay to be fixed, on the revised scales of
pay indicated therein.
It is not necessary to set out further details of the actual provisions of 1980 scheme. While on behalf
of the petitioners, it was contended that the revised scales of pay and the terms included therein
were highly detrimental to the employees concerned, on the other hand, it was contended on behalf
of the Union of India as well as the General Insurance Company that on the whole, the revised scales
of pay provided for better pay and allowances and better opportunities to the employees concerned.
One of. the intervener unions also states that the 1980 scheme is not completely devoid of Merit.
Parties have taken us through in detail by help of charts and other figures in support of the
respective cases and contentions. It is not necessary, in view of the nature of the contentions raised
before us, to express any opinion on the merits or demerits of the rival contentions of the parties in
respect of the details of either or both the schemes. It may, however, be stated that there has been a
ceiling on increase of pay automatically with the increase of the rise in the cost of index. The
respondents, namely, the union of India as well as the General Insurance Company, contended that
in comparison with other employees is governmental sectors or public sectors, the employees of the
general insurance companies were 'High wage islanders' and it was necessary to put a ceiling on the
emoluments and other amenities in order to facilitate better functioning of the insurance companies
concerned as well as subserve the object and purpose of the nationalisation policy. The various
detailed items of the scheme of 1974 and 1980 have to be viewed in this background.

The-basic and, in our opinion, the main questions are- has the Government and the respondents
power in law to introduce the 1980 scheme and if they have that power, have they exercised that
power in any arbitrary and whimsical manner to deny to the petitioners any of the fundamental
rights and whether the petitioners have been discriminated against? These, therefore, are the
questions and it is not necessary, in our opinion, to detain ourselves with lengthy extracts from the
scheme of 1974 and 1980 to examine which is better or which is detrimental and if so, to what
extent. On these, there will be and are divergent views.
The scheme of 1980 has been framed by the Central Government under the authority given to it by
the Act under General Insurance Business (Nationalisation) Act, 1972. The scope of that authority
has, therefore, to be found under Chapter V containing Sections 16 & 17 of the Act. We have set out
hereinbefore the terms of Sections 16 & 17. Sub- section (1) of Section 16 authorises the Central
Government, if it is of the opinion that "for the more efficient carrying on of general insurance
business, it is necessary to do so, may, by notification, frame one or more schemes" providin for all
or any of the matters enumerated in the different clauses of Section 16(1) of the said Act, and the
matters have been set out in the different clauses of the said sub- section. For the present purpose,
clause (g) is relevant, which gives authority to the Central Government to frame scheme for
rationalisation or revision of pay scales and other terms and conditions of service of officers and
other employees wherever necessary. Clause (j) of the said sub- section gives authority to the Central
Government also to frame scheme for such incidental, consequential and supplemental matters as
are necessary to give full effect to the scheme. Therefore, the question that is necessary for this
purpose to determine, is, whether the power given to the Central Government by clause (g) for the
rationalisation or revision of pay scales and other terms and conditions of service a of officers and
other employees, wherever necessary can be said to authorise the Central Government to frame the
present scheme under consideration. This must be judged in conjunction with sub-section (6) of
Section-16 which authorises the Central Government, by notification, to add, to amend or to vary
any scheme framed under section 16. The point at issue, is, whether rationalisation or revision of
pay scales and other terms and conditions of service of officers and other employees wherever
necessary can authorise the Central Government to frame scheme like the scheme of 1980, which is
unconnected with or unrelated to the merger of one Indian insurance company with another
insurance company or the formation of a new company by the amalgamation of two or more Indian
insurance companies. In order to find that out, it is necessary to read the provisions of this Act as a
whole. Primarily, if the words are intelligible and can be given full meaning, we should. not cut down
their amplitude. Secondly, the purpose or object of the conferment of the power must be borne in
mind. The first indication of the said object in this case, as is often in similar statutes, can be
gathered from the preamble to the Act. We have noticed the preamble of the present Act. This
preamble has also to be read in the light of sub- section (2) of Section 16 which provides that the
object of the Central Government in framing the schemes under sub- section (1) was to give
authority to the Central Government to frame schemes, to ensure that ultimately there are only four
insurance companies (excluding the Corporation) in existence and that they are so situate as to
render their combined services effective in all parts of India. Sub- section (2), therefore, to a large
extent circumscribes the amplitude of the power given under sub-section (1) of Section 16 of the Act
As framing of the scheme is an exercise of the delegated authority by the Central Government, the
memorandum regarding delegated legislation submitted to the Parliament along with the General

insurance Business (Nationalisation) Bill, 1972 will provide. some guidance also. As we have noticed
that clause 16 of the said Bill which later on became Section 16 of the Act explained the need for
delegated authority and stated the object as 'to frame one or more scheme for the merger of one
Indian insurance company with another or for the amalgamation of the two or more insurance
companies and for matters consequential to such merger or amalgamation as the case might be'.
Bearing in mind that this is a delegated legislation and keeping in mind that the authority to frame
the scheme must be found within the object of the power given under Chapter V of the Act and
reading the entire connected provisions together, it appears to us, that the only authority or power
to frame scheme given was for the purpose of merger of one Indian insurance company with another
for amalgamation of two or more Indian insurance companies and for matters consequential to such
merger or amalgamation as the case might be. Any scheme though, it might come within the wide
expressions used in sub-section (6) or Section 16 as well as clause (g) or clause (j) of sub-section (1)
of Section 16 which is unrelated to or unconnected with the amalgamation of the insurance
companies or merger consequent upon nationalisation would be beyond the authority of the Central
Government. This has to be so if read in conjunction with sub-section (2) of Section 16 of the Act. It
is evident from the scheme of 1980 that it is not connected with or is not for the purpose to ensure
that ultimately there are only four insurance companies existing and they are so situate as to render
combined services effective in all parts of India. It is true that subsequent to the merger of the four
insurance companies, scheme as indicated herein-before, dealing with Provident Fund, Gratuity etc.
have been framed but these, in our opinion, are irrelevant when judging the question of the
authority to frame a particular scheme which is impugned. It is also true that the scheme of 1974 so
far as pay scale was concerned as indicated in the scheme as we have set out herein-before provided
that the scheme would remain in force initially for a period upto 31st December, 1976 and thereafter
shall continue to be in force unless modified by the Central Government. It is also true that the
employees themselves, as indicated herein-before, wanted revision of pay scales and claimed
through their numerous charters of demands amending or framing of a fresh scheme by the
Government on the basis that the Central Government alone had the authority to frame the scheme
under the Act. Certain amount of revision of pay scale and other terms and conditions become
inevitable from time to time in all running business or administrations. Clause (g) of sub- section (1)
of Section 16 authorises the Central Government to frame scheme for rationalisation and revision of
pay scales and other terms and conditions of services of officers and other employees wherever
necessary. But it is evident that the scheme of 1980 impugned in these petitions is not related to the
object envisaged in sub-section (2) of Section 16 of the Act. In order to be warranted by the object of
delegated Legislation as explained in the memorandum to the Bill which incorporated Section 16 of
the Act, read with the preamble of the Act, unless it can be said that the scheme is related to
sub-section (2) of Section 16 of the Act, it would be an exercise of power beyond delegation. The
duty of the Court in interpreting or construing a provision is to read the section, and understand its
meaning in the context. Interpretation of a provision or statute is not a mere exercise in semantics
but an attempt to find out the meaning of the legislation from the words used, understand the
context and the purpose of the expressions used and then to construe the expressions sensibly.
There is another aspect which has to be kept in mind. The scheme is an exercise of delegated
authority. The scope and ambit of such delegated authority must be so construed, if possible, as not
to make it bad because of the vice of excessive delegation of legislative power. In order to make the

power valid, we should so construe the power, if possible, given under Section 16 of the Act in such
manner that is does not suffer from the vice of delegation of excessive legislative authority.
It is well-settled that unlimited right of delegation is not inherent in the legislative power itself. This
Court has reiterated the aforesaid principle in Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. The Asstt.
Commissioner of Sales Tax & Ors. The growth of Legislative power of the executive is a significant
development of the 20th century. The theory is iaissez-faire has been given a go-by and large and
comprehensive powers are being assumed by the State with a view of improve social and economic
well-being of the people. Most of the modern socioeconomic legislations passed by the legislature
lay down the guiding principles of the Legislative policy. The legislatures, because of limitation
imposed upon them and the time factor, hardly can go into the matters in detail. The practice of
empowering the executive to make subordinate legislation within he prescribed sphere has evolved
out of practical necessity and pragmatic needs of the modern welfare State.
Regarding delegated legislation, the principle which has been well-established is that legislature
must lay down the guidelines, the principles of policy for the authority to whom power to make
subordinate legislation is entrusted. The legitimacy of delegated legislation depends upon its being
used as ancillary which the legislature considers to be necessary for the purpose of exercising its
legislature power effectively and completely. The legislature must retain in its own hand the
essential legislative function which consists in declaring the legislative policy and lay down the
standard which is to be enacted into a rule of law, and what can be delegated is the task of
subordinate legislation which by very nature is ancillary to the statute which delegates the power to
make it effective provided the legislative policy is enunciated with sufficient clearness a standard
laid down. The courts cannot and do not interfere on the discretion that undoubtedly rests with the
legislature itself in determining the extent of the delegated power in a particular case. lt is true that
in this case under Section 16(1)(g), rationalisation or revision of pay scales and other terms and
conditions of service of officers and other employees wherever necessary is one of the purpose for
which scheme can be, framed under Section 16(1) of the Act. It is also true that incidental,
consequential and supplementary matters as are necessary to give full effect to the scheme are also
authorised under clause (j) of sub-section (1) of Section 16. It has also to be borne in mind that
scheme and every amendment to a scheme framed under section 16 shall be laid as soon as may be
after it is made before each House of Parliament. The last provision is indicative of the power of
superintendence that the legislature maintains over the subordinate legislation of scheme framed by
the delegate under the authority given under the Act. From that point of view, it is possible to
consider as indeed it was argued on behalf of the respondents in this case, that having regard to the
fact that one of the objects of the Preamble is regulation and control of general insurance business
and other matters connected therewith or incidental thereto and having regard to the fact that
rationalisation and revision of pay scales whenever necessary was one of the objects envisaged
under sub-section (1) alongwith clause (j) of sub-section (1) of Section 16 of Section 16 read with the
safeguards of section 17 as we have set out herein-before in case of revision and rationalisation of
pay scales whenever it becomes necessary as in this case, according to the respondents, it had
become necessary, the scheme of 1980 was permissible within the delegated authority. But we must
bear in mind the observations of Mukherjea, J. in The Delhi Laws case to the following effect:

"The essential legislative function consists in the determination or choosing of the

legislative policy and of enacting that policy into a binding rule of conduct. It is open
to the legislature to formulate the policy as broadly and with as little or as much
details as it thinks proper and it may delegate the rest of the legislative work to a
subordinate authority who will work out of the details within the framework of that
policy".
But as explained before the Act must be read as a whole. The Act must be read in conjunction with
the preamble to the Act and in conjunction with the memorandum in Clause No. 16 of the Bill which
introduced the Act in question. But above all it must be read in conjunction with sub-section (2) of
Section 16 of the Act which clearly indicated the object of framing the scheme under Section 16(1) of
the Act. The authority and scope for subordinate legislation can be read in either of the two ways;
namely one which creates wider delegation and one which restricts that delegation. In our opinion,
in vies of the language of sub-section (2) of Section 16 and the memorandum to the Bill in the
peculiar facts of this case the one which restricts the delegation must be preferred to the other. So
read, in our opinion, the authority under Section 16 under the different clause of sub-section (1)
must be to subserve the object as envisaged in sub-section (2) of Section 16 of the Act, and if it is so
read than framing of a scheme for purposes mentioned in different clause of sub-section (1) of
Section 16 must be related to the amalgamation or merger of the insurance companies as envisaged
both in the memorandum on delegated legislation as well as sub-section (2) of Section 16. We may
mention in this connection that in the case of A.V. Nachane & Another v. Union of India & Another,
this contention of delegated legislation was adverted to. In that case the Court was concerned with
Life Insurance Corporation (Amendment) Act, 1981 where the policy of the Act as stated in the
preamble of the Amendment Act was that "for securing the interests of the Life Insurance
Corporation of India and its policy-holders and to control the cost of administration, it is necessary
that revision of the terms and condition of service applicable to the employees and agents of the
Corporation should be undertaken expendiously. That was the object of the Act in question.
Unfortunately that is not the object indicated as the object of the power to frame scheme under
Section 16 of the present Act. In view of that object mentioned in the said decision and for other
reasons in the case of A.V. Nachane & Another v. Union of India & Another (supra), this Court held
that the Act in question did not suffer from the vice of excessive delegation. In view of what we have
stated herein- before, the scheme of 1980 so far as it is not related to the amalgamation or merger of
insurance companies, it is not warranted by sub-section (1) of Section 16. If that be so, the scheme
must be held to be bad and beyond authority.
This being the position, it is not necessary to examine the various other contentions raised in this
case. Various contentions have been made. Both sides relied on various decisions in support of their
respective contentions. Both sides relied on the decisions dealing with the employees of the Life
Insurance Corporation and the Acts and the amendments in connection with their terms of
employment. We will just note the decisions. Reliance was placed on the decision in the case of
Madan Mohan Pathak v. Union of India & Ors, Etc. The question in that decision was that the
validity of Section 3 of the Life Insurance Corporation (Modification of Settlement) Act, 1976. The
questions involved in that decision, in the view. we have taken as well as in the facts of the instant
case, are not relevant. In last mentioned case there was a writ petition which was allowed by the

learned single Judge of the High Court and appeal was preferred from that decision. During the
pendency of the appeal, there was an amendment to the Act namely, the Life Insurance Corporation
(Modification of Settlement) Act, 1976. In the Letters Patent Appeal, the Corporation stated that in
view of the impugned Act, there was no necessity for proceeding with the appeal and the Division
Bench of Calcutta High Court made no order on the said appeal. This Court held among other things
that the rights of the parties had crystalized in the judgment and became the basis of a Mandamus of
the High Court and it could not be taken away by indirect fashion proposed by the Act under
challenge before this Court.
Chandrachud, J., as the learned Chief Justice then was, speaking for himself and Fazal Ali and
Shinghal, JJ. concurred with the majority view on the basis that the impugned Act violated Article
31(2) of the Constitution and was therefore void. Bhagwati, J. speaking for himself and on behalf' of
Iyer & Desai, JJ. was of the view that irrespective of whether the impugned Act was constitutionally
valid or not, the Corporation was bound to obey the writ of Mandamus issued by the High Court and
to pay the bonus for the year 1975-76 to class III and Class IV employees. The said learned judges
held that writ of Mandamus was not touched by the impugned Act. The other observations of the
said Judges as well as the other learned Judges are not relevant in the view we have taken. In instant
case before us we do not have any case of settlement which was the subject matter there between the
workers and the employers and the rights flowing therefrom.
Reliance was also placed on the decision in the case of The Life Insurance Corporation of India v.
D.J. Bahadur & Ors as well as the decision in the case of A.V. Nachane Another v. Union of India &
Another (supra). In the view we have taken, it is not necessary to examine these decisions in detail.
In those cases, the question under consideration was the Life Insurance Corporation Act, 1956 and
the subsequent amendments thereto as well as certain orders in respect of the same.
The basis upon which the aforesaid two decisions proceeded were (a) a right had crystalized by the
directions in D.J. Bahadur's case (supra) and this could not be altered or taken away except by a
fresh industrial settlement or award or by relevant legislation and (b) the relevant legislation which
was the subject matter of challenge in A. V. Nachane's case (supra) can not take away the rights
which had accrued to the employees with retrospective effect. As is evident from the facts of the case
before us, the situation is entirely different. We are concerned here with the question primarily
whether the scheme is authorised by the Act and if it is so authporis-
ed, the question is whether the Act in question is constitutionally valid in the sense it had taken
away any rights which had crystalized or whether it infringed Article 14 of the Constitution. These
decisions also deal with the question whether a special legislation would supersede a general
legislation and which legislation could be considered to be a special legislation. It may be noted that
we are not concerned with any settlement or award. In that view of the matter, it is not necessary to
detain ourselves with the said decisions. and the various aspect dealt with in the said decisions.
Another aspect that was canvassed before us was whether Section 16 of the 1972 Act with which we
are concerned in any way affected any industrial dispute and whether the provisions of sub-section
(5) of Section 16 or sub-section (7) of Section 16 in any way curtailed any right. in respect of any

industrial dispute and if so whether the General Insurance Business (Nationalisation) Act, 1972 is a
special legislation or whether the Industrial Disputes Act, 1947 is a special legislation in respect of
adjudication of rights between the employees and the employer.
If we had held that the scheme of 1980 was permissible within the power delegated under Section 16
of the General Insurance Business (Nationalisation) Act, 1972, it would have been necessary for us
to discuss whether there is any conflict between the provisions of the said Act and the Industrial
Disputes Act, 1947 and if so, which would prevail. Section 16(5) of the 1972 Act, as we have noticed
earlier, stipulates that notwithstanding anything contained in the Industrial Disputes Act, 1947 or in
any other law for the time being in force, the transfer af the services of any officer other employee of
an Indian insurance company to the acquiring company shall not entitle any such officer or other
employee to any compensation under that Act or other law, and no such claim shall be entertained
by any court, tribunal or other authority. This, to a certain extent, clearly excludes the operation of
the Industrial Disputes Act, 1947 in respect of disputes arising on the transfer of the business of
general insurance. There is no such question before us. Had it been possible to hold that the scheme
of 1980 was valid in proper exercise of the authority under Section 16 of the Act, a question would
have arisen as to whether the ceiling and other conditions on emoluments could be imposed on the
employees in the manner proposed to be done under the scheme of 1980 without reference to the
procedure for adjudication of these matters under the Industrial Disputes Act, 1947. Then the
question had to be judged h by reference to sub-section (5) and sub-section (7) of Section 16 of the
1972 Act. Section 16 empowered the Government by notification to add to, amend or very any
scheme framed under Section 16(1) Sub-section (7) provides that the provisions of this section,
namely Section 16 of the 1972 Act and of any scheme under it shall have effect notwithstanding
anything to the contrary contained in any other law or any agreement, award or other instrument
for the time being in force.
We have noticed the scheme of 1980. That scheme puts certain new conditions about retirement,
about emoluments and other benefits of the employees. It may be noted that the application of
Industrial Disputes Act as such in general is not abrogated by the provisions of 1972 Act, nor made
wholly inapplicable in respect of matters not covered by any provisions of the scheme. This aspect is
important and must be borne mind.
Wrongful dismissal, other disciplinary proceedings, unfair labour practices, victimization etc. would
still remain unaffected by any scheme or any provision of the Act. The only relevant and material
question that would have arisen, is, whether in case where a statutory ceiling which one of the
counsel for the petitioners tried to describe as "statutory gherao" on rise of increase in emoluments
and other benefits with the rise in the cost of index of prices" affected the position under the
Industrial Disputes Act, 1947. It may be noted as we have noted before that this is not a case where
any dispute was pending before any tribunal or before any authority under the Industrial Disputes
Act, 1947 between the workmen concerned and he insurance companies. Though there was
conciliation proceedings, the Conciliation proceedings could' not reach to any successful solution
and the conciliation officer has made a report failure of conciliation. The Government had the
report. Thereafter the Government has not referred the dispute to any industrial tribunal hut has
framed a scheme which is the subject matter of challenge before us. It cannot, in our opinion, be

said that conciliation proceedings or any proceeding under the Industrial Disputes Act were pending
and therefore in the middle of the proceedings under the Industrial Disputes Act, the Government
had acted and framed the scheme and as such the same was bad and illegal. There were no
proceedings pending under the Industrial Disputes Act, 1947. With the finding of the Conciliation
officer, the Government had two options, either reaching a settlement or framing a scheme on the
one hand or to make a reference to the tribunal of the dispute regarding the points mentioned in the
demands of the workmen. There is one factual dispute which, in our opinion, is not very material.
According to the petitioners, the Government had not acknowledged the receipt of the failure report
of the Conciliation officer. According to the respondents, the receipt was acknowledged; the failure
of the conciliation proceedings, however, is admitted. No further steps or proceedings were required
as such. The Government had to assess on the failure of tile conciliation proceedings either to refer
the matter to the tribunal or to take such steps as it considered necessary. If the Government had
not taken any of the steps, then it was open, if the employees concerned were in any way aggrieved,
to take appropriate proceedings against the Government for doing so. As mentioned hereinbefore if
the scheme was held to be valid, then the question what is the general law and what is the special
law and which law in case of conflict would prevail would have arisen and that would have
necessitated the application of the principle . "Gener alia specialibus non derogant". The general
rule to be followed in case of conflict between two statutes is that the later abrogates the earlier one.
In other words, a prior special law would yield to a later general law, if either of the two following
conditions is satisfied.
(i) The two are inconsistent with each other.
(ii) There is some express reference in the later to the earlier enactment.
If either of these two conditions is fulfilled, the later law, even though general, would prevail.
From the text and the decisions, four tests are deducible and these are: (i) The legislature has the
undoubted right to alter a law already promulgated through subsequent legislation, (ii) A special law
may be altergated or repealed by a later general law by an express provision,
(iii) A later general law will override a prior special law if the two are so repugnant to each other that
they cannot co-exist even though no express provision in that behalf is found in the general law, and
(iv) It is only in the absence of a provision to the contrary and of a clear inconsistency that a special
law will remain wholly unaffected by a later general law. See in this connection., Maxwell on "The
Interpretation of Statutes" Twelfth Edition, pages 196-198.
The question was posed in the case of The Life Insurance Corporation of India v. D.J. Bahadur &
Ors. (supra) where at page 1125, Krishna Iyer, J. has dealt with the aspect of the question. There the
learned Judge posed the question whether the LTC Act was a special legislation or a general
legislation. Reference in this connection may also be made on Craies on "Statute Law" Seventh
Edition (1971) paras 377-382, but it has to be brone in mind that primary intention has to be given
effect to. Normally two aspects of the question would have demanded answers, if the scheme of 1980
was held to be valid on the first ground as we have discussed, one is whether the General Insurance

Business (Nationalisation) Act, 1972 is a special statute and the Industrial Disputes Act, 1947 is a
general Act or vice versa, and secondly whether there is any express provision in the General
Insurance Business (Nationalisation) Act, 1972 which deals with the subject. Now in this case we
have categorical reference to the Industrial Disputes Act, 1947 in sub-section (5) and sub- section (7)
of Section 16 of the General Insurance Business (Nationalisation) Act, 1972. There is, however, one
aspect w here it would have been necessary had we held the scheme to be valid otherwise, if there
had been no General insurance Business (Nationalisation) Act, 1972, then the employees would have
been entitled to raise a dispute on the question of increase of emoluments and revision of pay scale
with rise in the cost of index of the prices under the Industrial Disputes Act, 1947. In such a
situation, the Government, after conciliation proceedings, was empowered to make a reference if it
considered so necessary having regard to the nature of the disputes raised. Though it cannot be said
that reference was a matter of right but it was within the realm of power of the Government and the
Government has a duty to act with discretion on relevant considerations to make or not to make a
reference taking into consideration the facts and circumstances of each case. To that limited extent
it could have been said That this right or power has been curtailed by the General Insurance
Business (Nationalisation) Act, 1972, if the scheme was otherwise valid Having regard to the context
in which the question now arises before us, in our opinion, there is no question as to whether the
provisions of Industrial Disputes Act would prevail over the provi-
sions of General Insurance Business (Nationalisation) Act. There is no industrial dispute pending as
such. The General Insurance Business (Nationalisation) Act, 1972 has not abrogated the Industrial
Disputes Act, 1957 as such.
The question of the application of the principle of "Generalia specialibus non derogant" has been
dealt with in the case of J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. State of U.P. & Ors. Some
of these aspects were also discussed in the case of U.P. State Electricity Board & Ors. v. Hari Shanker
Jain and Ors.
Had it been possible to uphold the scheme of 1980 as being within the power of 1972 Act, it would
have been also necessary for us to consider whether such a scheme or Act would have been
constitutionally valid in the context of fundamental rights under Article 14, article 19(1)(g) and
article 31 of the Constitution and the effect of the repeal of article 31 by the 44th amendment of the
Constitution. The General Insurance Business (Nationalisation) Act was put in the Nineth Schedule
of the Constitution as item 95 on 10th August, 1975. The effect of putting a particular provision in
the Nineth Schedule at a particular time has been considered by this Court in the case of Prag Ice &
Oil Mills & Anr. Etc. v. Union of India. It was held by the learned Chief Justice in the said decision
that on a plain reading of article 31A, it could not be said that the protective umbrella of the Nineth
Schedule took in not only the. acts and regulations specified therein but also orders and
notifications issued under those acts and regulations. Therefore if any rights of the petitioners had
been affected by the scheme of 1980 then those rights would not enjoy immunity from being
scrutinised simply because the Act under which the scheme was framed has been put in the Ninth
Schedule. In any event any right which accrued to the persons concerned prior to the placement of
the Act in the Nineth Schedule cannot be retrospectively affected by the impugned provisions.

It was contended that the rights of the petitions under article 19(1)(g) have been affected by the
impugned legislation and the scheme framed thereunder. Empowering the Government to frame
schemes for carrying out the purpose of the Act, does not, in our opinion, in the facts and
circumstances of the case, in any way, affect or abridge the fundamental rights of the petitioners and
would not attract article 19(1)(g).
The other aspect which was canvassed before us was whether the Act and the scheme in question
violated article 14 of the Constitution. This question has to be understood from two aspects, namely
whether making a provision for salary and emoluments of the petitioners who are the employees of
the General Insurance Corporation specifically and differently from the employees of other public
section undertakings is discriminatory in any manner or not and the other question, is, whether
making a provision for the employees of General Insurance Corporation for settlement of their dues
by schemes and not leaving the question open to the general provisions of Industrial Disputes Act,
1947 is discriminatory and violative of the rights of the employees.
It is true that sometimes there have been rise in emoluments with the rise in the cost of index in
certain public sector corporations. The legislature however is free to recognise the degree of harm or
evil and to make provisions for the same. In making dissimilar provisions for one group of public
sector undertakings does not per se make a law discriminatory as such. It is well-settled that courts
will not sit as super-legislature and strike down a particular classification on the ground that any
underinclusion namely that some others have been left untouched so long as there is no violation
of constitutional restraints. It was contended that the application of the Industrial Disputes Act not
having been excluded from the Nationalised Textile Mills, Nationalised Coal and Coking Coal Mines
and Nationalised Banks but if and is so far as it excluded the application of the Industrial Disputes
Act, in case of general insurance companies, the same is arbitrary and bad. In this connection
reliance may be placed on the observations of the learned Chief Justice in the case of 'Special Courts
Bill 1978'. The same principle was reiterated by this Court in the case of State of Gujarat and Anr. v.
Shri Ambica Mills Limited, Ahmedabad etc. In that case, this Court was of the view that in the
matter of economic legislation or reform, a provision would not be struck down on the vice of
underinclusion, inter alia, for the reasons that the legislature could not be required to impose upon
administrative agencies task which could not be carried out or which must be carried out on a large
scale at a single stroke. It was further reiterated that piecemeal approach to a general problem
permitted by under-inclusive classifications, is sometimes justified when it is considered that
legislatures deal with such problems usually on an experimental basis. It is impossible to tell how
successful a particular approach might be, what dislocation might occur, and what situation might
develop and what new evil might be generated in the attempt. Administrative expedients must be
forged and tested. Legislators recognizing these factors might wish to proceed cautiously, and courts
must allow them to do so. This principle was again reiterated in the Constitution Bench decision of
this Court in the case of R. K. Garg etc. v. Union of India & Ors. etc As there was no industrial
dispute pending, we are of the opinion that on the ground that the petitioners have been chosen out
of a vast body of workmen to be discriminated against aud excluding them from the operation of
Industrial Disputes Act, there has been no violation of Article 14 of the Constitution. This question,
however, it must be emphasised again, does not really arise in the view we have taken.

Before us it was contended that sick mills which have been nationalised have been treated
differently than general insurance employees under 1972 Act in Section 16(5) and Section 16(7) and
in the scheme framed under the General Insurance Business (Nationalisation) Act, 1972. The object
and purpose of the Sick Textile Undertakings (Nationalisation) Act, 1974, was "reorganising and
rehabilitating such sick textile undertakings so as to subserve the interests of general public by
augmentation of the products and distribution at fair prices of different varieties of cloth and yarn".
The basic objective of the said Act was rehabilitation of the sick textile mills. That was different from
the purpose of the present Act. The sick textile units had under them the bulk of their employees as
workmen those who came under the provisions of Industrial Disputes Act. Section 14 of the said Act
statutorily recognises the special position of the workmen as contra- distinguished from the other
employees by enacting separate provisions in this respect thereon. Further-more it has to be borne
in mind that the aforesaid Act was concerned with the ensuring; augmentation of production and
distribution of certain cloth and yarn which are commodities essential to the national economy
being important consumer items Therefore the case of the employees of sick textile undertakings
which has been mentioned by the petitioners and argued before us cannot be compared on similar
lines in respect of this aspect with the present petitioners. We would have rejected this submission
on behalf of the petitioners, had it been necessary for us to do so but in the view that has been taken,
it is not necessary.
Another item mentioned before us was the employees or Coking Coal Mines Nationalisation Act,
1972. lt has to be borne in mind that the object covered by the scheme of the Act was entirely
different from the General Insurance Business (Nationalisation) Act, 1972. The Coking Coal Mines
(Nationalisation) Act, 1972 was enacted to provide for the transfer of the interest of the owners of
such mines and also the transfer of the interest of owners of coke oven plants with a view to
"reorganising and re-constructing such coal mines and plants for the purpose of protecting, serving
and permitting scientific development of resources of coking coal needed to meet the growing
requirement of iron & steel industry". According to the normal prevalent view, the workmen of
Coking Coal Mines were sweated labour. These workmen constituted very large percentage of the
employees. The act in question namely the Coking Coal Mines (Nationalisation) Act recognised the
independent existence of the said workmen as a class. It has also to be kept in mind that coking coal
is a commodity very vital to the national economy and prime raw materials of iron & steel industry
which is a basic industry. The workmen employed in the coal mines were also sweated labour. Their
special position was also statutorily recognised in the said Act. Coal is also one of the basic materials
required to sustain growth. The provisions of Coking Coal Mines (Nationalisation) Act have been
considered in detail and the special feature has been taken note of in the case of Tara Prasad Singh
etc. v. Union of India & Ors. According to the respondents, Class III and Class IV employees of the
General Insurance Company are high wage earners. They are islanders by themselves-according to
the respondents. It is true that judges should not bring their personal knowledge into action in
deciding the controversy before the Courts but if common knowledge is any guide, then undoubtedly
these employees are very highly paid in comparison to many others. The object of the General
Insurance Business (Nationalisation) Act, 1972 is to run the business efficiently so that the funds
available might be utilised for socially viable and core projects of national importance. From one
point of view the Nationalised Banks and the Insurance Companies for the purpose of applicability
or otherwise of the provisions of the Industrial Disputes Act cannot be treated as belonging to one

class. Historical reasons provide an intelligible differentia distinguishing Nationalised Insurance

Companies from the Nationalised Banks. The reason suggested by the respondents was that prior to
Banks Nationalisation, Industrial disputes between workmen and the Banks were treated since 1950
on All India basis with the totality of the banks being involved therein. Several awards have been
made treating them as such like Shastri Award, 1953. Shastri Award Tribunal was constituted with a
view to settle the disputes of the workmen of the Banks with all commercial Banks (excluding
Co-operative Banks etc.) on the one hand and the employees on the other. Desai Award, 1962
bipartite settlement between Indian Banks Association and the Exchange Banks Association on the
one hand and All India Bank Employees Association and All India Bank employees Federation on
the other, are some of the examples. As against this, prior to the Act in question before us, disputes
between insurance companies and their workmen were settled on independent company basis with
no All India projections involved. It may also be noted that unlike the case of some banks, there is
no existing award or settlement with the petitioners employees of the general insurance companies
and the four insurance companies. The financial resources, structures and functions of the Banks
are different from those of the insurance companies. It may also be noted as was pointed out to us
on behalf of the respondents that Bank's Class III and IV employees are about 4,58,000 in 1982 as
compared to insurance companies which employ about 25,000 Class Ill and Class IV employees.
Therefore for the purpose of rationalisation, the insurance companies wanted to curtail their
emoluments on a small scale. It cannot be said that there are no distinguishing factors and that for
choosing a particular group for experiment, the respondents should be found guilty of treating
people differently while they are alike in all material respects Differentiation is not always
discriminatory. If there is a rational nexus on the basis of which differentiation has been made with
the object sought to be achieved by particular provision, then such differentiation is not
discriminatory and does not violate the principles of article-14 of the Constitution. This principle is
too well-settled now to be reiterated by reference to cases. There is intelligible basis for
differentiation. Whether the same result or better result could have been achieved and better basis
of differentiation evolved is within the domain of legislature and must be left to the wisdom of the
legislature. Had it been held that the scheme of 1980 was within the authority given by the Act, we
would have rejected the challenge to the Act and the scheme under article 14 of the Constitution.
It was also urged before us on behalf of the respondents that the petitioners being employees of
public sector undertakings, and these are economic instrumentalities of the State and having regard
to the contents and contour of the concept of public employment as developed in the Indian legal
system, an employee in a public sector can be approximated with and treated as a government
servant. Having regard to the principles which govern the employer and employee relationship in
the governmental sectors, the conditions of service of employees in public employment should be
exclusively governed by the statute and by the rules and regulations framed thereunder. Predication
of such power would necessarily exclude the provisions of Industrial Disputes Act and the principles
of collective bargaining just as these would exclude the principles of contractual relationship in such
matters. The point is interesting. However,, in the view we have taken, we need not discuss this
aspect any further.
It was further submitted on behalf of the respondent that the rationale justification and the genesis
of the law of nationalisation being the creation of economic instrumentalities to subserve the

constitutional and administrative goals of governance in a social welfare society, the running of
public sector undertakings is neither for profit earning of the management nor for sharing such
profits with the workmen alone but to utilise the investible funds available as a result of such
ventures and undertakings for socially-oriented goals laid down by the governmental policies
operating on the said sectors. In this connection reference was made before us to the decision in the
case of State of Karnataka & Anr. etc. v. Ranganatha Reddy & Anr. etc Employment is the public
sector undertakings enjoys a statuh. It was submitted that both historically as well as a matter of
law, the public sector undertakings being the economic instrumentalities of the State and
discharging the obligations which the State have, the employees of such undertakings in principle
cannot be distinguished. from the employees in the government services. In this connection our
attention was drawn to the case of Sukhdev Singh & Ors. v. Bhagat Ram Sardar Singh Raghuvanshi
& Anr. It was urged that in all constitutional democracies. the relationship between the government
and the civil service is exclusively governed by the statutory provisions with the power in the
Government to unilaterally alter the conditions of service of the government employees. Reference
was made to "The Law of Civil Service " by Kaplan. It was further submitted that in India the law is
that origin of the Government service might be. contractual but once appointed to a post under the
Government, the government servant acquires a status and the rights and obligations are no longer
dependent on the consent of both the parties but by statute.
We would have considered these aspects had it been necessary for us to do so but it is not necessary
in the view taken. We may reiterate that article 14 does not prevent legislature from introducing a
reform i.e. by applying the legislation to some institutions or objects or areas only according to the
exigency of the situation and further classification of selection can be sustained on historical reasons
or reasons of administrative exigency or piece-meal method of introducing reforms. The law need
not apply to all the persons. in the sense of having a universal application to all persons. A law can
be sustained if it deals equally with the people of well-defined class- employees of insurance
companies as such and such a law is not open to the charge of denial of equal protection on the
ground that it had not application to other persons.
In the view we have taken of the matter, these applications succeed and the impugned scheme of
1980 must be held to be bad as beyond the scope of the authority of the Central Government under
the General Insurance Business (Nationalisation) Act, 1972. The operation of the scheme has been
restrained by the order passed as inter in order in these cases. The impugned scheme is therefore
quashed, and will not be given effect to. The parties will be at liberty to adjust their rights as if the
scheme had not been framed. The application for intervention is allowed. Let appropriate writs be
issued quashing the scheme of 1980. This, however, will not prevent the Government, if it so
advised, to frame any appropriate legislation or make any appropriate amendment giving power to
Central Government to frame any scheme as it considers fit and proper. In the facts and
circumstances of these cases and specially in view of the fact that petitioners had themselves at one
point of time wanted that new scheme be framed by the Central Government, we direct that parties
will pay and bear their own costs in all these matters. The rules are made absolute to the extent
indicated above.
N.V.K. Petitions allowed.


Ajoy Kumar Banerjee & Ors. Etc Vs Union of India & Ors. Etc On 21 March, 1984

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Ajoy Kumar Banerjee & Ors. Etc Vs Union of India & Ors. Etc On 21 March, 1984

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Ajoy Kumar Banerjee & Ors. Etc vs Union Of India & Ors.

Etc on 21 March, 1984

Supreme Court of India

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Sec. 16(2) and invalid- Whether suffers from vice of

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regarding sick leave was also introduced. ' F

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Allowing the writ petitions,

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9. Piece-meal approach to a general problem permitted by under-inclusive classifications, is

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Ambrish Kumar for Intervener in WP. 5370.

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Explanation.-The compensation payable to an officer or other employee under this

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The petitioners further state that the employees of the insu-

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"The essential legislative function consists in the determination or choosing of the

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(i) The two are inconsistent with each other.

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class. Historical reasons provide an intelligible differentia distinguishing Nationalised Insurance

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N.V.K. Petitions allowed.

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